USD/MXN bears flirt with 18.20 amid five-day losing streak as banking, inflation woes recede

• USD/MXN dribbles around three-week low as bears take a breather during five-day downtrend.
• US Dollar bears the burden of risk-on mood, mixed data.
• Hawkish hopes from Banxico contrast with the Fed policy pivot talks to weigh on Mexican Peso pair.

USD/MXN holds lower grounds near 18.22 as sellers flirt with the lowest levels in three weeks during early Wednesday. In doing so, the Mexican Peso pair drops for the fifth consecutive day.

The quote’s latest weakness could be linked to the market’s cautious optimism surrounding the health of the global banking system, as well as the likely easing in recession woes in some of the developed nations due to the double-barrel attack of COVID-19 and geopolitics. However, a comparatively less hawkish bias for the US Federal Reserve (Fed) than the Banxico appears the key catalyst for the USD/MXN pair’s south-run.

Be it the Silicon Valley Bank (SVB) deal or the European and the US policymakers’ readiness to defend their respective banking system, not to forget bold efforts by the major central banks to infuse US Dollar-linked liquidity in the market, the traders seem to cheer them all of late. However, a lack of major catalysts allows them to take a breather.

On the same line could be the mixed US data as the Conference Board (CB) Consumer Confidence rose to 104.2 in March, versus 101.0 expected and an upwardly revised prior figure of 103.4. Further, US Housing Price Index rose 0.2% MoM in January versus -0.6% expected and -0.1% prior while the S&P/Case-Shiller Home Price Indices matched 2.5% YoY forecasts for the said month compared to 4.5% previous readings.

On the contrary, Mexican Trade Balance marked a wider deficit in February, to $1.844B versus the $0.9B expected.

It should be noted that the news that Australian Treasurer Jim Chalmers will convene a meeting of the country's top financial regulators to check how the latest volatility in global financial markets could affect the country, an official in the treasurer's office said on Tuesday per Reuters, prod the optimism. Furthermore, a discussion revealing the US and European regulators’ dislike for the latest banking fallouts and risks associated with it joined the much-debated $5.4 million Credit Default Swap (CDS) trade of Deutsche Bank to prod the risk-on mood.

Amid these plays, US Treasury bond yields print a three-day uptrend while the S&P 500 Futures print mild gains, the first in three.

Looking ahead, the second-tier US housing numbers may entertain market players but more important will be the headlines surrounding the global banking sector's health and easing fears of more rate hikes by the top-tier central banks.

Technical analysis

The last Wednesday’s corrective bounce failed to cross the 50-DMA hurdle, around 18.56 by the press time, which in turn directs USD/MXN bears towards the 18.00 round figure.